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A version of this entry was written for Civil Beat and published on May 6, 2015.

On April 27, 2015, Corinthian Colleges, Inc., the publicly traded corporation that bought Heald Colleges in 2010, ceased all operations nationwide, including the closure of Heald College in Honolulu. Yesterday, Corinthian filed for bankruptcy.

Looking into the details behind the fall of this large institution brought back memories of the Bernie Madoff ponzi scheme mixed together with the mortgage crises that left many “investors” trying to make sense of what happened to them.

All of Heald College programs were considered “gainful employment programs” by the US Department of Education and subject to specific federal regulations regarding accurate reporting of post-graduation job placement rates. Obviously, students were making financial risk calculations between the debt they would incur against the added economic value of a Heald College certificate or degree. And as the largest student loan provider, the US government had a stake in ensuring students could repay these loans when they got placed in higher paying jobs.

According to CollegeView.com, Heald College Honolulu is considered a private for-profit community college. It charged $13,740 for in-state tuition and fees for school year 2013-14.

Heald invested heavily in student recruitment and helping students fill out federal loan and grant applications. Its nationwide business model was so effective that students enrolled at Heald Colleges collectively received $67 million in Federal Pell Grant funds, $139 million in Direct Loan program funds, and $4 million in campus-based program funds during the 2013-14 award year alone.

Last month, the US DOE sent Corinthian a “Notice of Intent to Fine Heald College” to the amount of almost $30 million. This letter was sent at the conclusion of a 16 month US DOE investigation into “performance disclosure documents” and evidence of job-placement rates.

The letter stated that, “Heald College failed to meet the fiduciary standard of conduct by misrepresenting its placement rates to current and prospective students and to its accreditors, and by failing to comply with federal regulations requiring the complete and accurate disclosure of its placement rates.”

The US DOE detailed one of the most egregious misrepresentations that it uncovered. Heald Stockton reported a job placement rate of 78 percent for its Medical Assisting program graduates, but the US DOE examined the same records and calculated that the more accurate rate was only 33 percent of graduates were placed in the higher paying job they were trained for.

If Heald Stockton had reported this accurate figure it would have lost its program accreditation, and prospective students would have assessed this risk/investment differently.

If you knew that less than 35 percent of your class would complete the two-year program, and then only 33 percent of those graduates would get a job in that field, you might reconsider taking on tens of thousands of dollars in debt.

This is similar to the mortgage collapse because Heald was basically selling students “a house” at a price they knew students would not be able to afford. It is like the Madoff ponzi scheme because as long as no one investigated the details of how money was being made, a few showcase clients would continue to see a return on their investment - those minority of Heald graduates who actually got placed in a higher paying job. But the majority of student “investors” would walk away with crippling debt.

Like both of those financial tragedies, people who should have been protecting consumers dismissed the clear signs that something was not adding-up.

In 2012, Heald was granted an initial 6-year accreditation by Western Association of Schools and Colleges (WASC). WASC also accredits University of Hawaii, Hawaii Pacific University, Chaminade University, Brigham Young University, and Argosy.

The WASC accreditation process a full year to complete. The WASC review team consisted of seven members who compiled a 108 page report for the WASC Commissioners to evaluate.

The report began with background information on the 150 year-old Heald Colleges: how it was a non-profit entity until 2007 and then in 2010 it was purchased by the publicly-traded corporation Corinthian College, Inc. The WASC review team thought this purchase was fortuitous for Heald and its future: “This relationship provides a number of benefits, including access to greater financial assets than the College previously had available.”

Reports this large are often written in sections by different team members and then they are consolidated as one report; this may explain why there seems to be some blatant inconsistencies regarding the elements that would become the center of the US DOE’s $30 million fine.

In one section the 2011 WASC report stated, “The College job placement rate – 83% in 2008 and 77% in 2009 – is commendable, as is the college’s work on tracking and publicizing student

employment rates.”

However, in another section, the report acknowledged that most student grievances concern “financial aid” and “job placement assistance.”

Perhaps the most ironic section in the report: “The visiting team recommends that the College continue to monitor its admissions and financial aid processes with vigor and with expectations for high standards of professional conduct. The visiting team also recommends that the College continue to disclose program graduation rates, as well as statistics on gainful employment and information regarding the transferability of course credits to four-year institutions.”

After WASC team members visited the Heald Honolulu campus in October 2011 to conduct “Review of Off-Campus Site.” The team made specific observations and findings, including: “Data suggest that graduation rates are slightly higher than average across all campuses.” The team required follow-up: “Data in the Heald College fact book will be studied more closely.”

Despite these prescient reservations, the WASC Commissioner’s granted Heald an initial six-year accreditation. However, the approval letter did state that the “Commission is deeply concerned with the very low levels of completion at some sites and in some programs.” The commission continued to underscore this concern throughout seven paragraphs of its five-page letter.

Mitigating the Damage

In the immediate aftermath of the Heald closure there have been some supportive posts on the Heald College - Honolulu facebook wall, including from UH Leeward Community College: “If you weren't able to attend the Transfer Days, you can still connect with Leeward Community College. Simple, fast online form and we'll connect you with the right person to help. http://www.leeward.hawaii.edu/Heald-Info-Request”.

In fact, the UH system has a great interactive database that allows Heald college students to immediately identify which Heald courses would receive credit at a particular UH community college.

For a more permanent mitigation strategy, Congressman Mark Takano from California co-introduced the Protections and Regulations for Our Students Act (aka PRO Students Act).

Introducing The PRO Students Act, Takano explains: “it is critical that our students are able to make informed decisions about where they will receive the quality, affordable higher education that is right for them. Unfortunately, some schools, particularly those in the for-profit college sector, are employing predatory, fraudulent, and deceptive practices to enroll students, and then leave them with unsustainable debt, worthless credits, certifications, and degrees, and dismal job prospects.”

The PRO Students Act would ensure that students have access to important and accurate information and data, strengthen oversight and regulation, and hold schools accountable for violations and poor performance.

The bill would bolster consumer protections for students and strengthen whistleblower protections for faculty and staff.

Hawaii’s delegation should consider signing-on as co-sponsors.

This tragedy raises other questions that may help the higher ed community address student needs.

Why are students opting for a private, for-profit community college like Heald, when they could have enrolled at a University of Hawaii Community College for one quarter of the costs?

Is it simply the status of attending a private school?

Should our community colleges invest more in outreach and aggressive recruitment? At a minimum UH should survey all incoming students who are transferring into UH from a private for profit school and ask them what could UH have done to better serve them in the first place.

Someone suggested there might be more online courses available at a private community college. That might be a misconception as UH Community Colleges offer hundreds of online courses every semester. Honolulu Community College offered 45 online and cable TV courses from its campus. If these courses are filling up and locking out students who need this access then UH should respond to the needs of its students. This would be an easy fix with UH President David Lassner coming from an IT background.